We all need a little help sometimes, but it gets complicated when it concerns money. Whether it’s big purchases or emergency funds, loans are a great way to get you out of a financial pinch. Over 7.3 million Canadians took out loans in 2022.
Online loans are the new preferred method of borrowing money. However, keep in mind that personal loans are not something you can pay off at your convenience. Loans can be a sinkhole if you don’t know what you’re doing.
Before you apply for a loan, read on to find out more and learn if a loan application is right for you.
With so many online scams going on in the world, it can seem risky to take out an online loan. However, like bank loans, online loans are safe as long as the lender has a good reputation. You wouldn’t take out a personal loan from a shady bank, so don’t entertain sketchy websites.
Do your research and read customer reviews before committing to a lender. If the loan conditions look too good to be true, they likely are. Some lenders offer attractive rates but use scare tactics to get their money back.
A reputable lender must be transparent about the conditions of your loan and their operations.
How Much You Need to Loan
After finding a reputable lender, the next step is to decide your loan amount. Personal loan sizes start at $500. However, most lenders have a starting rate of $1,000-$2,000.
Lenders also have varied types of loans depending on your needs. This can range from emergency loans to car payment loans. Regardless, it’s essential to understand how much you need because you don’t want to borrow more than you need.
A higher loan amount means higher debt and monthly payments. Knowing how much you need will also enable you to create a payment strategy once you’ve acquired the loan.
Your Credit Score
Poor credit can harm your borrowing power. Lenders, whether from banks or online platforms, will review your credit history. This information helps them ascertain whether you are able to make your monthly repayments.
If you have poor credit, you can look into a credit repair company or work on repaying your debt before applying for a loan. When repairing your credit score, it also helps to avoid acquiring new debt. Fortunately, there are plenty of online lenders that can give you a reasonable loan amount regardless of your credit history.
You only need to provide a sound repayment plan. At Eastern Loans, we look at your bank account and whether you have a stable income.
Loan Approval Period
Online loans tend to provide faster approval periods, but it doesn’t hurt to check. You don’t want to get caught off-guard and wait more than a few days to get your loan approved. This can setback your plans, especially if your loan is for an emergency.
If you have more than enough time, you have the advantage of looking through your options and choosing the best lender.
One of the most crucial things to consider when applying for a loan is your ability to pay it back. The last thing you want is to garner more debt and end up with a bigger problem than when you started. Interest rates vary depending on your repayment period and total loan amount.
Lenders may also consider your credit score and other loan conditions. Fortunately, personal loan providers allow you to choose a repayment plan that’s compatible with your income. Some lenders will offer incentives if you agree to autopay.
Keep in mind that longer repayment terms often mean higher interest rates. That means that while you may be paying a more convenient rate, it is still way more than your original loan.
Understand the Costs You Need to Pay
Unfortunately, some loans have a ton of hidden costs, which can cripple you rather than help you. That’s why it’s essential to choose a provider that’s transparent about all their fees. Personal loan lenders sometimes have an origination or sign-up fee.
This is an amount they subtract from your loan for processing and administration costs. The cost doesn’t usually go beyond 1-5%, but others will charge a flat fee rate. It’s best to avoid origination fees when you can, as there are plenty of providers that charge nothing more than the interest.
Pros of Online Loans
Online loans are one of the best ways to get fast cash when you’re in a pinch. Online lenders have immediate customer service, so you don’t need to wait in a long line. Lenders can check your qualifications faster.
This allows some loans to get approved in only a few minutes. You can also pre-qualify for multiple loans at once. This makes it easier to find the best terms and interest rates depending on your needs and preferences.
Online loans are also much more flexible in terms of credit scores. You’ll be able to find a lender even if you don’t have the most favorable credit history. However, if this is your case, you may need to pay higher interest.
Cons of Online Loans
One of the biggest disadvantages of online loans is that they are more prone to fraudulent activity. Advance fee loans are the most common scam in Canada. Unfortunately, many have fallen victim to this scam and lost millions.
People may feel uneasy about applying online because of the amount of sensitive information they need to share. Loan providers require your bank account information and other personal details. Talking to a bank representative in person may be able to put you more at ease.
If you aren’t tech-savvy, online loans may not be the best fit for you.
Apply for a Loan Today
Here’s everything you need to know before applying for an online loan. Online loans can provide quick access to cash and more flexibility, but you need to know where to look.
Our representatives at Eastern Loans understand that life comes with surprises. We’re here to help with that. Contact us today to learn more about your loan options.